Timor-Leste

Trade for Peace Week at the WTO — a positive look at how trade can and should contribute to global peace and stability

· December 8, 2020 · Trade for Peace · , , , , , , , , · No Comments

As covered in remarks by Deputy Director-General Alan Wolff during the first day of Trade for Peace Week on November 30, the push for a multilateral trading system was the belief that global cooperation and integration through expanded trade ties would contribute to global stability and peace. Because of the importance of the linkage of trade and peace, I have copied a large part of DDG Wolff’s statement from November 30 below (footnotes omitted). The entirety of his speech can be found at WTO news, November 30, 2020, DDG Wolff calls for more structured WTO cooperation with humanitarian and peace communities, https://www.wto.org/english/news_e/news20_e/ddgaw_30nov20_e.htm.

“Trade for Peace: the Past

“Contemplating the relationship between trade and peace has a long history. In AD 100, Plutarch wrote that sea trade allowed one to cooperate and ‘redress defects’ in their relationships through mutual exchange.
In the 1700s, Montesquieu specified that peace is a ‘natural’ consequence of trade. The legal and theological underpinnings for this philosophy were provided by Hugo Grotius, who held that the purpose of free trade was to unite the world in peace.

“This history, as well as current relations among nations, provide fresh evidence for a proven correlation between peace and open trade. Trade does not guarantee peace, but it is an essential foundation for the economic stability that makes peace more possible. Peaceful relations in turn make the expansion of trade achievable. As China’s Premier, Li Keqiang recently said, ‘without a peaceful and stable environment, nothing would be possible.’ This is recognized as being all too true for a number of the countries, no strangers to conflict, who have recently joined the WTO as well as several who seek to do so.

“The conceptual linkage between trade and peace provided the foundation for the multilateral trading system. The 1948 Havana Charter for the International Trade Organization (ITO) was drafted immediately after two devastating world wars and the Great Depression. The purpose of the founders, to use trade to promote peace is reflected in the Charter’s opening words: ‘to create conditions of stability and well-being which are necessary for peaceful and friendly relations among nations’.

“The idea of using trade as an integral part of the management of relations between nations had been championed by Woodrow Wilson a few decades earlier in his Fourteen Points at the Paris Peace Conference
after the First World War. The points were agreed to by all the nations attending the conference and implemented by none. But the thread was not lost. It was picked up by Secretary of State Cordell Hull who served Franklin Roosevelt between 1933 and 1944. Hull believed that one ‘could not separate the idea of commerce from the idea of war and peace’. ‘[I]f we could increase commercial exchanges among nations over lowered trade and tariff barriers and remove international obstacles to trade, we would go a long way toward eliminating war itself.’ He sought through bilateral trade agreements, which were concluded on a most-favored-nation basis, that is, they were nondiscriminatory, to deliver on the promise of the trade and peace linkage that he held dear.

“While the Havana Charter failed to create the ITO, the cause of peace was served by the coming into force of the General Agreement of Trade and Tariffs (GATT) which, in the absence of the ITO, served as an
ad hoc arrangement of rules for international trade until it was eventually transformed into the WTO in 1995.

“For over seven decades, the rules-based multilateral trade system has provided an enabling environment to foster unprecedent levels of economic prosperity and poverty reduction in modern human history.

“There is academic and empirical evidence that the attainment of peace and security is supported by international cooperation through trade and economic interlinkages. (Indeed, there will be a dedicated discussion on this subject at Session 4 of the Trade for Peace Week). The contribution to the advancement of peace through the creation of the European Union, the largest and most impressive of the post-WWII economic integration projects, was recognised by the award of the Nobel Peace Prize in 2012.

“The Capstone Research Project, which the WTO Secretariat conducted with the Graduate Institute last year, identified 157 peace agreements concluded over the last century as containing economic clauses. These largely pertain to the removal of impediments to free movement of goods, people and services; economic reconstruction through industries, investments, and entrepreneurial enterprises; and improvement in the standard of living through economic reconstruction activities. Only ten of 300 trade agreements examined
make explicit reference to peace. The cause of peace may be served, but homage to the express linkage that motivated the founders of the multilateral trading system largely disappeared. If we believe that trade does serve as an enabler for peace, a subject which is at the core of our discussions this week, the trade and peace communities should consider bringing this connection to the attention of trade negotiators and peace negotiators whenever conflict-affected nations are involved.

“Trade for Peace: The Present

“Peace was not explicitly referenced in the Marrakesh Agreement Establishing the WTO in 1995 or the launch of the Doha Development Round in 2001. The trade and peace linkage had either been taken for granted or was no longer seen as very relevant. This is remarkable especially given the recent end of the Cold War, which had threatened global annihilation through the use of nuclear weapons. But the vision did not die. Three years ago, a group of fragile and conflict-affected LDCs in the process of accession — Comoros, Sao Tomé and Principe, Somalia, South Sudan and Timor-Leste — came together, together with recently acceded LDCs — Afghanistan, Liberia and Yemen, and made the case that trade and economic integration can be employed to promote inclusive and sustainable peace, particularly for their countries. During the WTO’s 11th Ministerial Conference in Buenos Aires in December 2017, these LDC Ministers established the g7+ WTO Accessions Group.

“I was privileged to be part of the launch of the Group. These very poor, war-torn countries — reminded us of the original raison d’être for the multilateral trading system — to contribute to global peace and stability. I said at that time that:

“‘conflict or post-conflict status is not the usual topic for WTO members, not even at Ministerial Conferences. However, the pursuit by these countries of WTO membership, despite the challenges, reminds us of the critical contribution that the multilateral trading system can make to the peace and stability of nations.’

“Today, the WTO has 164 Members and 23 countries are in the process of joining the Organization. Nearly half of the acceding countries are categorized as fragile and conflict affected according to the World Bank’s definition. In addition to the LDCs in the g7+ WTO Accessions Group, Iraq, Lebanon, Libya and Syria — are all struggling to restore stability and focus on their much-needed economic recovery, which has been severely hampered by the recent pandemics. For these countries, the promotion of a just and sustainable peace is a fundamental motivation for becoming a WTO Member.

“The Trade for Peace through WTO Accessions Initiative is essentially a partnership between the trade, humanitarian and peace communities to assist those fragile and conflict affected countries in re-building institutions and economies that can serve as a foundation for a lasting peace. At the core, the accession process is about building domestic institutions on the pillars of non-discrimination, transparency and the rule of law. These precepts are designed to promote economic stability, create a conducive business environment through secure and predictable market conditions, encourage the movement of labour and investments and support integration into global value chains.

“Since the launch of the initiative, thanks to our partners from the peace community who are participating in the Trade for Peace Week, the WTO has deepened the understanding and increased the sensitivity towards particular challenges confronted by countries which are fragile and conflict-affected. Over the last two years, the WTO Secretariat has organised several activities with the peace community as part of the Trade for Peace initiative, involving the Geneva Peacebuilding Platform, the g7+ Secretariat, the Institute for Economics and Peace, the ILO and the World Bank. It has also involved actors from the private sector such as Nespresso.

“Among the most memorable of these events was the panel session in which the former leader of Timor Leste, Xanana Gusmão, participated in during the 2018 Public Forum in Geneva. He described the enormous economic potential of fragile and conflict affected states, indicating that: ‘trade, investment and cooperation among the countries in the world bring about prosperity and development. Trade is a peaceful alternative to war. . . We, the fragile and conflict affected countries are committed to promote ‘Trade for Peace’.’

“Another memorable occasion was listening to a panel discussion during the African Dialogue on WTO Accessions in Djibouti in which the ambassadors of Sudan and South Sudan, sitting next to each other, told us ‘where there is trade there is peace’. At the same event, Ambassador Mohammed Haqjo of Afghanistan, who has served as coordinator of the g7+ WTO Accessions Group from its inception, stressed that ‘economic cooperation and peacebuilding are gradual processes that should evolve concurrently’.

“There is much more that the trade and peace communities can and must do together to improve the conditions of fragile and conflict-affected countries. The Trade for Peace Week is expanding the Trade for Peace partnership, bringing in new ‘peace friends’ to the WTO, such as the International Committee of the Red Cross (ICRC), the UN Peacebuilding Commission, the UN Office for Coordination of Humanitarian Affairs (UNOCHA) and Interpeace. The WTO also welcomes our traditional friends to join us in the Trade for Peace efforts, including from the ITC, ICC,UN Technology Bank, UN Economic Commission for Africa, African Union and UNDP.

“We are fortunate to be joined by individuals, whether from governments or the private sector, who have direct experience in using trade and economic opportunities to promote peace in fragile and conflict-affected countries — with experience in Afghanistan, Ethiopia, Iraq, Lebanon, Liberia, Libya, Sierra Leone, Solomon Islands, Somalia, South Sudan, Sudan, Timor-Leste and Yemen. I am confident that through the ten programs this week, they will bring a wealth of expertise and their unique contributions to the table, promoting interdisciplinary approaches to achieving inclusive and sustainable peace through trade.

“Trade for Peace: the future

“Trade for Peace is part of our future. Two weeks ago, on 19 November, I spoke at the WTO’s 25th anniversary event. Of the nine points I listed as being relevant to the question of ‘What will the future of the WTO be like?’, my first two are very much relevant for the Trade for Peace Week. They are:

” ‘Our Membership, already accounting for 98% of world trade, will become universal through accessions.

“The WTO of the future will promote peace by creating economic conditions that bring greater stability to fragile and conflict-affected lands.’

“I continued:

“‘While dealing with current crises, we must anticipate future ones and put into place institutional and substantive changes needed to carry out our mission … We have the joint responsibility to make sure that the world trading system which has been entrusted to us is left, when our time of service comes to an end, in better condition than that in which we found it.’ [I am fully convinced that] ‘the nations of the world will ultimately come together in a spirit of international cooperation to create a stronger multilateral trading system, more responsive to the concerns of humankind, more fit for purpose.’

“The Trade for Peace initiative can contribute to making the trading system of the future more agile, responsive, humane and fit for purpose to support the well-being of humanity. The COVID-19 pandemic has exposed the vulnerability of multilateralism to protectionism, isolationism and nationalism, demonstrated by the initial reports of disruptions in access to medical supplies. The WTO of the future will need new forms of multilateral cooperation to deal with future crises, that can effectively respond to the needs of a wide diversity of members including those participating in the g7+ WTO Accessions Group.

“What are some possible next steps for contributions from the Trade for Peace platform? The following ideas emerged in conversations with our partners leading up to this week:

“create a White Paper on Trade and Peace, which could include the best practices of the use of trade policy instruments to promote positive peace.

“establish a permanent platform (e.g., a Working Group or Commission on Trade for Peace) to bring together trade experts and peacebuilders to explore a new agenda for the Trade for Peace initiative; and

“develop training materials on trade for peace, which could be used by trade practitioners and peace builders to deepen understanding of the use of trade as an instrument for inclusive and sustainable peace.

“We are hoping that participants will elaborate on these ideas and bring new ones to the table during their discussions throughout the week. The week-long discussions should help illuminate a clear path forward to upgrade the Trade for Peace initiative to a more structured WTO cooperation with our partners in the humanitarian and peace communities and beyond.”

At the conclusion of the Trade for Peace Week on December 4, DDG Wolff provided his thoughts on the week and restated actions that the WTO and those interested in peace could pursue moving forward. His statement is embedded below.

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A few thoughts

As 2020 comes to a close, there are many challenges to the multilateral trading system with relatively little good news. After nineteen years of negotiations, WTO Members have still not closed an agreement on fisheries subsidies. An outdated WTO rule book and widely divergent interests of WTO Members has rendered forward movement through negotiations on nearly all issues challenging if not impossible. True, there has been some progress in the first 25 years (the Trade Facilitation Agreement, the Information Technology Agreement and update), but most WTO Members are largely focused on plurilateral negotiations (e.g., e-commerce) or engaged in FTAs versus multilateral agreements. The dispute settlement system is at an impasse with fundamentally different views of what the system is supposed to achieve and limited actual ability to correct errant decisions or interpretations. Unilateral actions have been taken by an increasing number of WTO Members outside of the WTO rules. And the COVID-19 pandemic has seen some but limited cooperation and collaboration among WTO Members.

For the last three years, it has been nations suffering longstanding conflict and economic hardship that have grasped the promise of the multilateral trading system to provide a forum to promote the trade for peace message that has historically helped nations find a path to stability and peace. And it appears that it has been the WTO Secretariat, working with other organizations and groups, that has fashioned a potential game plan to reintroduce the core message of trade for peace back into the multilateral trading system.

As WTO Members look at reform in 2021, they should explore whether there isn’t a role for the Secretariat to tee up issues for consideration by the Members to help Members get past the current gridlock on even studying or debating matters of substantial importance where one or more Members would prefer no examination. WTO Members should also consider the budget of the WTO Secretariat to both permit greater monitoring of implementation of obligations by Members and also to do the analysis and outreach to other organizations to help on the range of issues that are facing the membership but not being addressed in a timely manner. Trade and environment issues, changes to rules to address needs of WTO Members in pandemics, updating of the rules to ensure they address all distortions to markets and reflect current trading situations, and the various Joint Statement Initiatives are all examples.

This should be a season of hope. All WTO Members and all those seeking to accede can contribute to restoring hope through their actions. The trade for peace initiative is an excellent example of the importance conceptually of the multilateral trading system for the larger cause of peace and stability. Let’s hope Members can restore the relevance of the WTO for the collective good and as an aid to peace and stability.



WTO Accessions — perhaps the most valuable benefit for Members in the first 25 years of the WTO’s existence

· November 30, 2020 · accessions, Trade for Peace Week · , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , · No Comments

Much has been written about the challenges facing the World Trade Organization twenty-five years after its birth at the beginning of 1995.

The Appellate Body (“AB”) has ceased functioning with the United States blocking the appointment of new AB members based on longstanding problems with the Dispute Settlement system that have not been addressed. There are fundamental differences among major Members in what the proper role of the dispute settlement system is. Because the AB’s view of its role has differed from that of at least some of the Members, many delegations have opted to litigate instead of negotiate on issues which are not covered by the actual language of existing agreements.

The negotiating function of the WTO has had limited success in the first 25 years of the WTO reflecting deep differences among Members in priorities and the core function of the WTO. The inability to update rules or develop new rules to address 21st century commercial realities has called into question the ongoing relevance of the organization Members have failed to honor agreement directions for periodic liberalization updates in agriculture and services trade. Members have also taken decades to tackle issues of pressing time sensitivity, such as fisheries subsidies.

And there are problems in the timeliness and completeness of notifications required by many agreements and the quality of the work of many of the Committees.

A bright spot for an organization in trouble has been the success of bringing additional countries and territories into the organization. Of the 164 members at present, 36 have joined since the WTO opened in 1995 and some 23 countries or territories are in the accession process at the moment. Some 98% of global trade is now covered by WTO Members. While there are many reasons for countries or territories to join the WTO, including integrating into the global economy and improving the competitiveness of the economy (Deputy Director-General Alan Wolff describes the benefits of accession as being a catalyst for domestic reform and economic growth), there is no doubt that accessions are of benefit to the global trading system and bring the benefits of liberalization in the acceding country or territory to the existing WTO membership. Indeed, commitments of acceding Members in terms of tariff liberalization and other obligations typically are far higher than the commitments of existing Members at the same economic stage of development. Yet, accession is of great benefit to acceding countries. See WTO press release, 8 November 2020, DDG Wolff: WTO accession is a catalyst for domestic reform and economic growth, https://www.wto.org/english/news_e/news20_e/ddgaw_06nov20_e.htm. DDG Wolff, in speaking to Arab countries in the accession process made the following comments:

“Furthermore, during the last eight months, the world has experienced unprecedented levels of disruptions in people’s daily lives and their economic activities due to Covid-19. The world is not near the end of this crisis. Despite these challenging times, trade has played a key role in addressing local shortages of food, medical supplies and other essentials during the pandemic.

“Trade will have to play an even greater role in supporting recovery of the global economy going forward. In this context, we should recognise the important role played by Saudi Arabia in steering the G20 during this difficult year, urging collective and multilateral cooperation. The Riyadh Initiative is a praiseworthy effort endorsed by the G20 nations.

“The Arab region has not escaped the dire economic consequences of this pandemic. For some, the steep fall in oil prices has aggravated existing problems. A crisis, however, also presents opportunities for closer international cooperation to limit the harm from the pandemic and to spur the recovery.

“These issues demonstrate that more, not less, global and regional trade integration is required. Integration into the world economy goes hand in hand with necessary domestic reforms. This is where WTO accession makes particularly valuable contributions. Those engaged in the reform-driven accession process are likely to experience a quicker recovery and greater resilience in the future.

“Based on evidence from the 36 accessions which have been successfully completed, the WTO accession process has served as an effective external anchor for domestic reforms, acting as a catalyst in realizing the potential of their economies. According to the last WTO Director-General’s Annual Report on WTO Accessions, Article XII Members have registered higher growth rates of GDP and trade (exports and imports), as well as increased flows of inward FDI stocks, in the years following their accession compared to the rest of the world. These results indicate that integrated, open economies tend to grow faster. In addition, by signalling a government’s commitment to international rules, WTO membership appears to also encourage the inflow of foreign investment.

“The accession process has been used by resource-based countries to diversify their economies. Economic diversification is one of the major priorities for the governments in the Arab region. Our 2016 study examined whether countries’ export structures became more diversified after gaining WTO membership. This was true for about half of the recently acceded
Members, which increased the number of exported products, measured in HS chapters, accounting for more than 60% of their exports after accession. This was achieved often through rebranding their economies with WTO membership and attracting increased FDI.”

From 1995-2016, the thirty-six countries or territories that joined the WTO included many of the major economies that were not original Members of the WTO. These included China, Chinese Taipei, Saudi Arabia, Vietnam, Ukraine, and the Russian Federation. The other countries or territories who have joined represent a wide cross-section of geographic regions and levels of development: Ecuador, Bulgaria, Mongolia, Panama, Kyrgyz Republic, Latvia, Estonia, Jordan, Georgia, Albania, Oman, Croatia, Lithuania, Moldova, Armenia, North Macedonia, Nepal, Cambodia, Tonga, Cabo Verde, Montenegro, Samoa, Vanuatu, Lao People’s Democratic Republic, Tajikistan, Yemen, Seychelles, Kazakhstan, Liberia, and Afghanistan. No accessions have been completed since 2016.

The twenty-three countries and territories that are in the process of accession often are countries or territories that have suffered from years of conflict. This has led the WTO to host the first “Trade for Peace Week” from November 30-December 4, 2020. See WTO press release, 25 November 2020, WTO to host first Trade for Peace Week, https://www.wto.org/english/news_e/news20_e/acc_25nov20_e.htm.

“In announcing the Trade for Peace Week, Deputy Director-General Alan Wolff noted: ‘The 2030 Agenda for Sustainable Development recognizes international trade as an engine for inclusive economic growth and poverty reduction that contributes to the promotion of sustainable development. This in turn can facilitate building and maintaining peace. The connection between trade and peace is the raison d’être for the creation of the rules-based multilateral trading system that led to economic recovery and prosperity after the devastation from World War II.’

“Currently, 23 countries are in the process of joining the WTO, and over a half of them suffer from a fragile situation from years of conflicts. Launched in 2017, the Trade for Peace initiative aims to assist fragile and conflict-affected (FCA) countries through WTO accession, with the emphasis on institution building based on the principles of non-discrimination, predictability, transparency and the rule of law. Based on experiences of former FAC countries, WTO accession can help set the conditions to move out of a state of fragility or conflict into a state of stability, economic well-being and peace.”

There are ten events this week. The public can register to participate in the virtual panels. See WTO Accessions, Trade for Peace Week, https://www.wto.org/english/thewto_e/acc_e/t4peace2020_e.htm.

DDG Wolff spoke at one of today’s event and his comments are embedded below. See WTO press release, November 30, 2020, DDG Alan Wolff – DDG Wolff calls for more structured WTO cooperation with humanitarian and peace communities, https://www.wto.org/english/news_e/news20_e/ddgaw_30nov20_e.htm.

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The twenty-three countries and territories in the process of accession include: Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Comoros, Curacao, Equatorial Guinea, Ethiopia, Iran, Iraq, Lebanese Republic, Libya, Sao Tome and Principe, Serbia, Somalia, South Sudan, Sudan, Syrian Arab Republic, Timor-Leste, and Uzbekistan.

Conclusion

The genesis for the GATT and the other Bretton Woods institutions was a desire to provide an infrastructure and global rules to minimize the likelihood of future world wars. Cooperation, collaboration and integration would all reduce the likelihood of global conflict.

The WTO provides the opportunity for countries or territories struggling to escape violence to embark on a path of hope. That is a core mission of the WTO today just as it was for the GATT in the late 1940s.

Moreover, the record over the first twenty-five years of the WTO’s existence has been that those countries and territories who take the challenging steps to become Members of the WTO improve their economies and speed growth, development and foreign direct investment. Accessions also offer real improvements in market access for existing WTO Members. A true win-win situation.

For an organization struggling to maintain relevance amidst deep divisions among Members who seem to have lost the consensus on the core purpose of the organization, the pilgrimage of non-member countries and territories to join the organization is a beacon of hope. Serious reforms and updating of the rule book are desperately needed for a better functioning system where outcomes are based on underlying economic strengths and not the interference of governments. A willingness of Members to refocus on what the purpose of the WTO is in fact and to be supporters of contributing to the maximum of one’s ability will be key to forward movement. Inspiration can be drawn from the efforts of non-members to join.